Filipinos could pay more for consumer goods next year due to the increase in the price of crude oil, local economists and the National Economic and Development Authority (Neda) said on Tuesday.
Socioeconomic Planning Secretary Ernesto M. Pernia said production cuts that would be implemented by members of the Organization of the Petroleum
Exporting Countries (Opec) in 2018 would hike the price of imported crude oil.
On the domestic front, Pernia said higher electricity rates and more expensive coal and local fuel would continue to exert pressure on inflation in the near term.
“Over the near-term, we still expect risks coming from both domestic and external fronts,” said Pernia, who is also the Neda chief. “Overall, however, the inflation outlook for full-year 2017 remains supportive of the current growth momentum of the country.”
University of Asia and the Pacific (UA&P) School of Economics Dean Cid Terosa said the Tax Reform for Acceleration and Inclusion (TRAIN) measure could also increase the prices of goods.
Terosa said the provisions of the TRAIN bill, particularly the increase in excise taxes, will be the “biggest contributor” to higher inflation next year. He said its passage could create a “domino effect” and impact not only transportation cost but also the prices of food items.
“The tax reform will help catapult inflation to 3.8 to 4.3 percent next year,” Terosa told the
BusinessMirror. “It will raise trade and transportation margins, thereby raising food prices.”
Filipinos had to contend with higher prices of goods in November as inflation during the month rose to 3.3 percent, from 2.5 percent last year.
While this was slower than the 3.5 percent posted in October, Pernia said inflation could settle “slightly above” the midpoint of the government’s inflation target of 2 percent to 4 percent.
Inflation averaged 3.2 percent between January and November. The highest inflation for the year was recorded in October.
“Inflation during the last 11 months suggests that the full-year average might settle slightly above midpoint, but will still be well within our target of 2 percent to 4 percent. This already considers expected price spikes owing to holiday-season spending this December,” Pernia said.
The Neda said nonfood inflation slightly increased to 3.3 percent in November 2017, from the previous month’s 3.2 percent.
Inflation for food and nonalcoholic beverages eased to 3.2 percent in November 2017, lower than October’s 3.6 percent. This was the lowest rate recorded since October 2016.
Pernia said this can be attributed to lower prices of vegetables, sugar, jam, honey, chocolate and confectionery, fruits, oils and fats, and rice.
“We are starting to see year-on-year price declines for ampalaya, cabbage, carrots, tomato, white potato and imported garlic in the National Capital Region [NCR]. This signifies that supply is starting to stabilize again,” he added.
PSA data showed inflation in NCR was at 4.9 percent in November 2017. It was the same rate recorded in the previous month while, in November 2016, the rate stood at two percent.
Inflation in Areas Outside NCR eased to 2.8 percent in November 2017. Inflation was 3 percent in the previous month and 2.6 percent during the same period a year ago.
Excluding select food and energy items, core inflation, however, moved up faster, at 3.3 percent in November 2017. In the previous month, it was registered at 3.2 percent, and in November 2016, 2.4 percent.
‘Squarely within target’
The lower inflation print in November also made the Bangko Sentral ng Pilipinas (BSP) more confident that price increases will remain squarely within its target for the year.
After the Philippine Statistics Authority’s announcement of a tamer November inflation on Tuesday, BSP Governor Nestor A. Espenilla Jr. said the development was in line with their latest forecasts for the year.
“The easing of inflation in November was expected, following the October peak. We’re still on track with the 3.2-percent inflation for 2017, just about the midpoint of target range,” Espenilla told reporters on Tuesday.
Aside from the affirmation of its inflation track, ING Bank Manila economist Joey Cuyegkeng also said the tamer inflation in November gives the BSP more leeway to maintain its current monetary-policy settings.
“The moderation argues for the BSP to continue to utilize this leeway of moderate and within-target inflation expectation by keeping policy settings steady at its December 14 policy-rate meeting,” Cuyegkeng said.
“We anticipate the first tightening move of the BSP in the second quarter of 2018,” he added.
Upside risks to inflation, however, are still in the picture despite the slower price growth in November due largely to higher global crude-oil prices and upon the implementation of the tax-reform measure as targeted in the first quarter of next year.
“The likely implementation of the Philippine tax-reform measure in the first quarter of 2018 would also exert some upward pressure on inflation. BSP regards the tax-related pressure as transitory,” Cuyegkeng said.
“We remain cautious and expect average inflation in 2018 closer to the upper end of the range, at 3.7 percent to 3.8 percent,” he added.
The economist’s inflation forecast is higher than the 3.4 percent projected by the BSP for 2018.